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- What is a Health Savings Account (HSA)?
It is a tax-favored savings account, owned by an individual, that allows funds to be accumulated tax-free, to pay for current and future qualified healthcare expenses.
- Who is eligible for an HSA?
Any individual that is covered by a qualified high deductible health plan (HDHP); is not entitled to benefits under Medicare, and not covered under any other health plan.
- Is an HSA an insurance policy?
No. The concept is two-fold. An individual will purchase a HDHP insurance policy. This policy provides protection for medical needs ABOVE the selected deductible. Then you open an HSA to fund qualified medical expenses leading up to the deductible. You may also use the HSA funds for any IRS qualified medical expenses that your insurance policy will not cover.
- How much can be contributed to the HSA and what are the tax advantages?
In 2023, an individual can contribute $3850. A family HDHP is limited to $7750 per year. Individuals age 55 and over can contribute and additional $1000 per year. In 2024, an individual can contribute $4150. A family is limited to $8300. Unused funds carryover and grow with the new contributions each year.
Contributions made by individuals and families are tax free and come "off the top" of your adjusted gross income or are pre-taxed if contributions are made through a "cafeteria" plan. Contributions by employers are not subject to normal withholding taxes. Interest and investment earnings from the HSA are also tax-free.
- What if I change jobs or move from my current location?
HSA's are owned by the insured/employee and are completely portable. You must maintain a HDHP to continue making contributions to the HSA, whether its an employer sponsored group plan or you purchase your own individual HDHP.
- What is a qualified HSA withdrawal?
Withdrawals for qualified medical expenses, including expenses that are not covered by insurance, are tax-free. Transfer of the HSA to a spouse upon death; withdrawals because of total disability; withdrawals to purchase health insurance under COBRA; and purchase of qualified long-term care insurance are all considered tax-free. Withdrawals for non-medical expenses are subject to income tax and an additional 20% excise tax.
- Where can I get more information about HSA's?
Contact us at sday@dayinsurancesolutions.com (see link below) or go to your state's Insurance Department website.
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